North Carolina Estate Planning Blog : North Carolina Estate Planning Lawyer & Attorney : Trust Counsel, PA : Trust Administration : Serving Chapel Hill, Durham, Raleigh, Pittsboro, Orange County, Chatham County

Recently, I heard a story about a family who used a reverse mortgage. The mother has Alzheimer’s but is in great physical health. The father was in good health and was caring for the mother. The son was recently out of work and decided it would be a good time to move back to help his father care for his mother. The parents recently qualified for Medicaid, but had a reverse mortgage line of credit to help in the event of emergencies. The house is worth $175,000.00 and they owe $35,000.00 on the reverse mortgage. The parents had intended to leave their estate, which consisted primarily of the house, to their son.

The father suffered a heart attack and passed away suddenly. The mother is physically “healthy as a horse,” as are many people who suffer from Alzheimer’s, and may have many years of life left. The son, however, may not be able to provide care for her for the rest of her life.

THE PROBLEM: If the mother has to go into a nursing home and is there for over a year, the reverse mortgage will be called. The mother and son, unable to repay it, will lose the house. The mortgage company will auction or sell the house and any money left over from the sale will go back to the mother, which will kick her off Medicaid. The parents’ lives of hard work to pay off their home and to have something to pass on to their loyal son may be lost in the blink of an eye.

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Most of what I write about relates to death, disability and taxes, and planning for those things.  Pretty heavy stuff.  So I'm glad to share this video with you, which features a 72 year old woman giving a hilarious deadpan testimony to growing older.

Thanks to my colleague Jennifer Garner for bringing this to my attention.  Below is a picture unrelated to the video linked to above, but in keeping with the tone of this post.  Enjoy!

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This morning on the way to work I heard an interesting piece on National Public Radio about the use of remote video monitoring of elderly persons.  There are also companies that provide less invasive methods of monitoring, such as motion detectors.  While I was certainly familiar with medical alert services that call for help at the push of a button, the more sophisticated programs described in the story were new to me.

While some may be concerned about  loss of privacy, such monitoring services can help provide peace of mind for spouses and children of elderly or disabled persons at a fraction of the cost of a in- home caretaker.

The article on NPR's website that I linked to above provides links to some of the businesses that provide these services.

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Wake Forest University's School of Law, known state-wide for its Elder Law Clinic program, offers valuable resources on its website, both North Carolina specific and otherwise.

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This post is by elder law attorney Kristin L. Burrows, who recently joined my firm.  Look for more entries from her in the future, focusing on elder law.

There are numerous rules governing who is eligible for Medicaid to help pay nursing home costs. Medicaid planning involves advising clients about what those rules are and applying the rules to their financial situation. The goal of Medicaid planning is to protect the client’s rights and maximize the assets that Medicaid allows them to keep or transfer.

In the overwhelming majority of cases, the people who are coming to see me for Medicaid planning are not wealthy, and are not trying to hide money. The people who come to see me are often the spouse or family member of an elderly person who needs to enter a nursing home. The family is overwhelmed by the circumstances. They are worried about how to pay for the huge nursing home bills and how to protect the spouse who is still living at home. They are devastated by the thought that everything their spouse or parent spent their life working for and saving will be depleted by their final health care costs. They are often planning for Medicaid eligibility in order to protect the spouse who will remain at home (the “community spouse”) from becoming impoverished, and to protect some resources to help the person entering the nursing home maintain the best possible quality of life in his or her last years.

The truth is, Medicaid planning is usually the last ditch effort. How many people really think about long-term care planning? Even if they have thought about it, how many people know how to plan for it? Who knows if they’ll need it? Who knows when they’ll need it? Who knows how long they’ll need it? Who knows what level of care they’ll need? Who knows how much it will cost by the time they need it?

Moreover, in situations where someone needs nursing home care, there are often many other issues going on simultaneously. In some cases, the person entering the nursing home has either reached the point or is about to reach the point that he can no longer make his own decisions. An elder law attorney can help you navigate all of these issues to understand your rights and options, and to develop a plan to tackle the hurdles ahead.

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The North Carolina Medicaid program paid a total of $52,575.14 in nursing home costs for Sallie Anthony. After Mrs. Anthony's death, Anna Thompkins, who would become the Executrix of Anthony's estate, contacted the State to inquire about its claim for the Medicaid expenditures. She then completed the probate of the Estate without paying the State. Some time later, the State filed suit against Thompkins, who defended herself by alleging that the statute of limitations had expired. The Court ruled for the State because the statute of limitations did not expressly apply to the State and, in the absence of express inclusion in the statute, the doctrine of nullum tempus occurritt regi (no time runs against the king) applies in North Carolina.

North Carolina Department of Health and Human Services v. Thompkins, 2010 N.C. App. LEXIS 1153 (July 6, 2010)

Source: July 13, 2010 NAELA eBulletin

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You or someone you love may be ready for a retirement community living arrangement, which typically includes lifetime residential accommodations, meals, and some degree of medical services. These facilities can be quite expensive. The good news: Unexpected tax write-offs may help offset the cost.

The tax-saving idea is that you may be able to deduct part of the retirement community's one-time entrance fee and ongoing monthly fees as medical expenses on your Form 1040, regardless of your current health status. Since the fees we are talking about here can be quite large (see right-hand box), meaningful deductions may be possible despite the limitation on medical write-offs. (You can only deduct medical expenses to the extent they exceed 7.5 percent of your adjusted gross income.)

Court Decision Shows the Way

For recent proof that substantial deductions are possible, we can point to a 2004 Tax Court decision. Source: Delbert L. Baker v. Commissioner (122 TC 143 (2004). In 1989, Delbert Baker and his wife bought into a resort-style retirement community. It provided four living arrangement categories:

• Independent living with minimal medical services,
• Assisted living with more medical help,
• Special care (for victims of Alzheimer's and dementia), and
• Skilled nursing with maximum medical services.

The Bakers paid a one-time entrance fee of about $130,000 plus monthly fees of over $2,000 in exchange for lifetime residential and medical care privileges for both spouses. (This was back in 1989. Today's prices would be much higher in many areas.)

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Genworth recently conducted a survey of the Cost of Care in North Carolina (Home Care, Adult Day Care, Assisted Living and Nursing Homes).  There are comparisons of the U.S. and NC as a whole, along with the largest metro areas in the state.

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I recently gave a presentation on the Legal and Contractual Aspects of Continuing Care Retirement Community (CCRC) Agreements.  The talk was very popular - I planned for 40 attendees and over 140 came!  I thought others might be interested in the topic - click here for the presentation handouts, which include a comparison of several local CCRCs in which I have clients.

Note:  As of June 17, 2010, the handout to which I have linked contains a few corrections to the Carolina Meadows information, courtesy of Liz Rossi of Carolina Meadows.

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In this North Carolina Court of Appeals case a Medicaid beneficiary was held liable for overpayment of Medicaid benefits when a newly discovered asset caused her to assets to exceed the resource limit: 

Ella Mae Cloninger entered a nursing home on May 28, 2000 and her children applied for Medicaid on her behalf. When the Medicaid application was filed, the children (allegedly) did not know their mother owned two endowment life insurance policies; the existence of the policies was not disclosed. Later, as a result of class action litigation, they became aware of the policies and, in June, 2005, disclosed them to Medicaid. The policies were cashed in ($330,685) and placed in an account in Ella Mae’s name. After receiving notice of the policies, the Medicaid agency terminated Ella Mae’s benefits because she was over-resourced. The Department then determined that an over-payment was made in the amount of $142,366.44. This decision regarding over-payment was appealed. The hearing officer found that the insurance policies were available resources and affirmed the over-payment, finding “[Petitioner] liable for the repayment of all Medicaid benefits paid on [their] behalf.” On appeal, the court found that an unknown asset is not necessarily unavailable. There was no legal impediment prohibiting Ella Mae from accessing the life insurance funds; because she was over-resourced when benefits were paid, the trial court correctly determined she was liable for the overpaid amount.

Cloninger v. North Carolina Department of Health and Human Services, 2010 N.C. App. LEXIS 564 (April 6, 2010)

Source: the 4/13/10 National Academy of Elder Law eBulletin.

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For those who have been through a similar experience, this poignant article Letting Go of My Father, which details Jonathan Rauch's struggles in caring for his elderly father, will solicit empathy.  For younger readers, it can provide a glimpse of things to come.

While the article does not cover the issue, the legal aspects of caring for an elderly relative can be greatly simplified by making sure a durable general power of attorney, health care power of attorney, living will and HIPAA authorization are in place early on.  Once an elder becomes mentally incapacitated, it's too late. 

Also, geriatric care managers can provide invaluable assistance, even when an elder is in facility, by monitoring health care, medications, etc.

Thanks to attorney Kathe Joyce for bringing the article to my attention.

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This posting is courtesy of attorney Marc Soss of Florida:

The aging demographics of the United States coupled with the Pension and Recovery Act of 2006 (the "PPA”) and Deficit Reduction Act of 2007 (“DRA”) have provided an excellent planning opportunity to create tax efficient vehicles to solve a clients’ long-term care planning needs. Beginning on January 1, 2010, a tax-free planning option will become available for individuals who desire to provide for long-term medical care by utilizing an existing annuity or life insurance contract purchased after 1996. While not a new concept (it dates back to 1997), the 2010 tax-free planning opportunity may be beneficial to an individual with a larger than needed life insurance policy death benefit, unaffordable monthly or annual premiums, an under-performing or matured deferred annuity contract, or the desire to incorporate long-term medical care into his or her estate plan. 

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North Carolina's elderly are particularly vulnerable to financial fraud and scams.  Check out the the North Carolina Department of Justice's website, which has helpful information for people of all ages to help protect themselves from identity theft, scams, and other crimes.  If you have an elderly family member without access to a computer,  please print the information and discuss it with them.

Even attorneys are being scammed these days, so it pays to be vigilant!

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The North Carolina Center for Public Policy Research just issued a press release with the results of a study indicating that North Carolina needs to do more to protect its senior citizens against fraud.  The Center also provided recommendations on what could be done to improve the current situation, including implementing new laws to require bank employees to report financial abuse against elderly customers.

Click "Continue Reading" for a list of signs that a senior may have been defrauded.

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Listen to this Podcast on the ElderLawAnswers website.

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Nursing home coverage for veterans is available from two sources within the Department of Veterans Affairs -- the veterans health care system and the state veterans homes system.

Nursing Home Coverage through the VA Health Care System
Nursing home coverage along with other long term care services such as home care and assisted living as well as geriatric care management are available through the Veterans Health Administration for qualifying veterans.

In order to get into the veterans health care program, the veteran must have service-connected disabilities, or be below a qualifying income level or be receiving Veterans Pension income. Once in the system, veterans are not guaranteed long term care services, including nursing home care, unless they meet specific requirements. Here is a list of these requirements for nursing home coverage.

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A recorded version of the National Academy of Elder Law Attorneys (NAELA)'s public webcast "Aging in America: How to Plan for it" is available for  through November 30 on the NAELA website. During the one-hour program, AARP and NAELA officials discuss talking with one's parents about aging, family issues in elder care, healthcare decision making, long term care insurance, reverse mortgages and more.

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The Housing and Economic Recovery Act of 2008 more than doubled the home value (now up to $417,000) to be used nationwide for establishing the size of loans available from the federal reverse mortgage program.  Loan origination fees were also lowered.

A reverse mortgage allows persons over age 62 to get lines of credit or cash payments based on the equity in their homes. Repayment is not required as long as borrowers remain in their homes.  Reasons for obtaining a reverse mortgage include paying off an existing mortgage, paying property taxes and getting cash to pay for daily living expenses.

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The National Academy of Elder Law Attorneys (NAELA) will be offering its first ever public Webcast on October 30, 2008.  Aging in America: How to Plan for it is a one-hour roundtable discussion program video recorded and broadcast "live" via the Internet.  Streamed at NAELA.org on October 30 at 1:00 pm ET, the free Webcast will be moderated by AARP's Wil Stoner and include NAELA panelists Bernie Krooks and Ron Fatoullah.

Click here for free registration.
 

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Services from care managers should be something that every family takes advantage of, but in reality very few families use them. Care managers could go a long ways towards helping the family find better and more efficient ways of providing care for a loved one.

The concept is simple. The family hires a professional adviser to act as a guide through the maze of long term care services and providers. The care manager has been there many times. The family is experiencing it usually for the first time.

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Planning for long-term care expenses should be a part of everyone's estate plan by the time they reach 50.  Here's a piece by Alex Townsend, CLTC of Raleigh on why it may not be a good idea to try self-insure:

Things To Consider:

“How much does someone have to be worth to not need long-term care insurance?”

What’s the magic number? How rich is too rich to not need LTC insurance protection? Even though I think that is the wrong question to ask (see next question), my answer is this: If you can write a check each month, indefinitely, for the kind of long-term care that you and your spouse will desire should you have the need, and it doesn’t bother you to write this check, then you may want to pass on LTC insurance.

“I want a number. Exactly how much does someone have to have to not need LTC insurance?”

My answer is a question. How much does someone have to be worth to not need Major Medical or Medicare Supplement or homeowners insurance? The reason I ask these questions is that we don’t think of other types of insurance in terms of whether we have enough money to not need them. Think about it: There are many wealthy people who could afford to rebuild their home if it burned to the ground, and the likelihood of that kind of total loss is minimal. You may want to take this opportunity to review all your insurance with a critical eye applying sound risk management principles. Perhaps LTC coverage is not the only potentially catastrophic cost you should consider
self-insuring. Assuming that you believe in the value of insurance and you insure for other large risks, why is long-term care insurance the one insurance that you won’t buy? Financially astute people don’t make the best decisions every time, but they also don’t make big mistakes. Most wealthy people don’t like their money to be vulnerable. If you buy LTC insurance and never use it, you might say you’ve made a small mistake. If you don’t buy LTC insurance and need it, you might say it was a big mistake.

Other Considerations:

• Today’s average cost (2007) in a skilled facility in the Piedmont NC area is approximately $190 per day or $70,000 per year. In 25 years, at a time you’re more likely to need care, if costs rise at just 5% annually, the cost will be approximately $700,000 per year. A need of 3 years would mean $2,100,000 total costs. Regardless of how much money you have, you or your family probably won’t be happy about writing those kinds of checks!
• The above example assumes just one person needs LTC. What if both spouses need it at the same time? I have clients where this is the case. It can and does happen.
•  How “liquid” will your assets be at claim time? Which asset will you liquidate first? Will you have to sell an equity that happens to be way down at the time? Will liquidation trigger unwanted capital gains taxes? As you save for the eventuality of needing LTC, what if your health takes an unexpected change for the worse sooner rather than later?

Often, after purchasing a policy, I have had many people tell me that they felt a tremendous sense of freedom, relief, and peace of mind saying things like, “now I can enjoy my money because I have so much more confidence knowing I have a resource in place in case the unthinkable happens”.

Plan...then relax!

 

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Nursing homes are being accused by some patient advocates and state long-term care ombudsmen of increasingly evicting patients who are too inconvenient or too costly to care for. And the most vulnerable appear to be those patients with dementia or highly vocal families who are on Medicaid, according to a recent Wall Street Journal report.

The federal government permits nursing homes to evict patients for specific reasons, such as endangering the health or safety of others and needing care only available elsewhere.

The facilities claim they play by the rules and follow federal guidelines, but an increasing numbers of formal complaints about nursing home discharge practices suggest otherwise.

The U.S. Administration on Aging has seen complaints double from 1996 to 2006. And this doesn’t take into account informal complaints or unreported incidents.

The reason for the increase in nursing home evictions – also referred to as involuntary discharges – appears to be financial. Evicted Medicaid patients are replaced by patients coming out of the hospital who pay a higher daily rate for short-term care and rely on Medicare or private insurance to pick up the tab.

This new focus on short-term recovery and rehabilitation makes good financial sense for facilities. One nursing home chain claims it averages $411 a day from Medicare patients but just $166 from those on Medicaid. As an industry, nursing homes report Medicaid reimbursements are $4.4 billion short of the actual cost of care.

Of course it’s the patients who suffer the most. Elderly and frail, they are transferred to other nursing home facilities, hospitals or psychiatric facilities, where they find it difficult to thrive in a totally new environment. The “transfer trauma” they experience results in mental health problems, weight loss, and frequent falls that can lead to death within months of a change in venue.

In comparison with nursing home patients, assisted living residents have even less protection. Management in assisted living centers can evict residents without reason or appeal process just by giving them one or two month’s notice. Here, too, the U.S. Administration on Aging has seen discharge practice complaints soar over the last decade. Accusations are growing that Medicaid patients are being targeted for eviction and two states are pursuing assisted-living companies on these charges.

Source: To be Old, Frail and Evicted: Patients at Risk. Wall Street Journal, 7 August.

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The Problem: Continuing care retirement communities have been growing in popularity with seniors for years.  Such communities usually require a "buy-in" upon admittance and many provide for a refund of a portion of the fee upon death.  The contracts (often called Residence and Care Agreements or the like) generally provide that the refund will be paid to the estate of the resident.  The trouble with this is that the refund triggers probate even if there are no other probate assets.  Since the refunds are often hundreds of thousands of dollars, unnecessary probate fees of $1,000 or more often result.

The Solution:  For those residents with living trusts, this can be avoided by a simple amendment to the Residence and Care Agreement that provides that the refund will be paid to the resident's living trust rather than his or her estate.  The amendment (or addendum, as some facilities call it) must be signed by the resident and the management of the facility.

For those residents without living trusts, the cost of having a trust prepared will generally be at least equaled by the probate cost savings alone, not to mention time and trouble avoided by escaping probate.

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A parent’s well being is a growing concern for many adult children who watch as a parent ages and perhaps encounters difficulties which are new to the entire family. The issues an aging parent may encounter can seem overwhelming and a child may not know where to turn for assistance. There are many services adult children can utilize as, or before, needs arise.  

At the forefront of most people’s minds is ensuring an aging parent’s day-to-day safety. For some, living at home is still an option, while others may require services that only an assisted living facility can provide. Unfortunately, it is often after an accident where a parent’s safety is at issue that families realize a decision must be made. However, there are steps that can be taken before an incident occurs to ensure an aging parent’s safety and comfort. 

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